When Wall Street learned in early May that Amyris (NASDAQ: AMRS) had successfully walked another tightrope and paid off $87 million in convertible debt, shares of the synthetic biology pioneer soared despite the fact that it needs significant new capital to keep the lights on. When the company followed up that news by teasing a new consumer brand in the high-value personal-care genre and two new board members with experience growing such brands, shareholders could hear the sound of crickets if they listened closely enough. Analysts might have that backwards.
To be fair, the reactions on Wall Street aren't difficult to interpret. Short-sellers were forced to cover their positions when Amyris strung together multiple last-minute transactions to avoid a barrage of dilution. Meanwhile, management hasn't coherently communicated the importance of consumer brands for the business.
That said, the recent announcement that the Pipette baby brand of personal-care products will launch in August 2019 suggests an opportunity is forming to clearly define the long-term strategy. Will management seize it?
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The boring, but profitable, world of consumer brands
Industrial biotech companies rely on genetic engineering and fermentation to manufacture chemicals ranging from ethanol to animal-free protein to cosmetics. Most have historically decided to hitch their business models on business-to-business (B2B) supply agreements, but that hasn't worked out very well. Despite the lack of success, many keep trying, determined to find the chemical ingredients that will make the business model work. Perhaps cultured cannabinoids will be the products investors have been waiting for, or maybe it'll be animal-free protein.
The irony to the endless search for products that will allow highly engineered microbes to live up to the hype sooner rather than later is that consumer brands have already demonstrated a high rate of success. Solazyme might have been the first with its Algenist cosmetic brand, which launched in 2011 and grew annual sales to $24.4 million -- at a gross margin of 68% -- by the end of 2014.
It eventually sold the assets to go all in on its large-scale manufacturing efforts in Brazil and went bankrupt shortly thereafter. But companies are increasingly, albeit slowly, learning that Solazyme was onto something.
Amyris eventually followed in the footsteps of its peer, diverting some of its B2B moisturizer ingredient supply into its own portfolio of cosmetic products under the Biossance brand in 2015. Today the products are sold in over 1,000 retail locations in the Americas and directly to consumers through the brand's website.